Property Division Mistakes to Avoid in Texas (A Community Property State)

Going through a divorce in Houston or elsewhere in Texas? Property division is one of the most important things that you and your spouse will need to work through. Too many people make big errors when navigating the Texas community property laws. In this article, our Houston property division attorney provides an overview of the most common mistakes to avoid in a Texas divorce.

Mistake #1: Making the Assumption that Everything Will Be Split Exactly in Half

Texas follows a community property system, but that does not mean a divorce court must divide property equally. Under Texas Family Code § 7.001, the court must divide the marital estate in a manner that is “just and right.” The standard gives the court discretion to allocate property unevenly if fairness requires it. A judge may consider several factors when determining a just and right division. These factors may include disparities in earning capacity, fault in the breakup of the marriage, health conditions, education levels, and future financial needs. 

Mistake #2: Not Identifying and Valuing the Entire Community Estate 

Another common mistake occurs when spouses fail to identify all community property before negotiating a settlement. Texas law presumes that property possessed by either spouse at the time of divorce is community property unless proven otherwise. Notably, the community property standard applies to a wide range of assets, including retirement accounts, stock options, deferred compensation, business interests, and real estate.

Mistake #3: Misunderstanding Separate Property Rights

Some spousal property may be separate property. Indeed, Texas law distinguishes between community property and separate property. Separate property generally includes assets owned before marriage, inheritance, and certain gifts received during the marriage. These assets remain the property of the spouse who owns them and are not subject to division in a divorce.

Mistake #4: Ignoring the Potential Tax Consequences of Asset Division

Property division decisions often carry significant tax implications. Certain assets may appear equal in value on paper but produce very different after-tax outcomes. Retirement accounts provide a common example. Dividing retirement assets may require the preparation of a Qualified Domestic Relations Order (QDRO) or similar legal instrument. Without proper documentation, a distribution from a retirement account could result in avoidable penalties.

Mistake #5: Overlooking Debt as a Part of “Property” Division

In Texas, both property and debt can be (and generally are) divided in a divorce case. That is a big issue that is far too often overlooked. Some of the most common debts include mortgages, vehicle loans, credit card balances, and business obligations incurred during the marriage. The failure to account for and consider these debts can be a big mistake. It could potentially distort the overall property division arrangement.

Call Our Houston Community Property Division Lawyer Today

At Lindamood & Robinson, P.C., our Houston divorce lawyers have the skills, knowledge, and experience to handle property division cases. If you have any questions about community property, please do not hesitate to contact us today. We handle property division in divorce in Houston and throughout all of Southeast Texas.

Source:

statutes.capitol.texas.gov/GetStatute.aspx?Code=FA&Value=7.001